George Nada (Roddy Piper) is a homeless laborer who arrives in Los Angeles looking for work. He listens for some seconds to some rambling street preacher (Raymond St. Jacques), but he dismisses his message and leaves when he notices that the police are coming. He eventually finds work on an L.A. construction site. One of the workers, Frank Armitage (Keith David), takes him to a local shantytown where most of the workers live. After eating at the soup kitchen and spending the night, he notices odd behavior at the small church across the street. Investigating, Nada discovers that the church's soup kitchen is a front: inside, the loud "choir practice" is a recording, scientific machinery fills a back room, and cardboard boxes are stacked everywhere, including some in a secret compartment that he stumbles across. The leader of the group (Peter Jason) is aware that Nada is onto them. The Street Preacher is also there. Now Nada notices that he's blind. In fact, although the Street Preacher discovers Nada gossiping around, when he notices that Nada has got rough hands because of rough handiwork, he lets Nada go free.
That night, the police arrive and surround the church, forcing the inhabitants to flee. The police then turn on the shantytown, destroying it with bulldozers and beating the blind minister of the church to death. Nada, Frank, and most of the inhabitants flee. Nada returns to the site the next day and investigates the church again, which has been emptied. He takes one of the boxes from the secret compartment and opens it in an alleyway. Expecting to find something valuable, he is a little dissapointed to find it full of cheap-looking sunglasses. He keeps one pair and hides the rest in a garbage can.
When Nada later dons the glasses for the first time as he walks down a sidewalk on Rodeo Drive, he discovers that the world appears in shades of grey, with significant differences. He notices that a billboard now simply displays the word "Obey"; without them it advertises that Control Data Corporation which is "creating a transparent computing environment." Another billboard (normally displaying "Come to the Caribbean" written above a lovely woman lying on a beach) now displays the text "Marry and Reproduce." He also sees that paper money bears the words "This is your God." All printed matter around him contains subliminal advertising from "Obey", "Consume", "Sleep", "No Independent Thought", and "Do Not Question Authority". While he stares disbelievingly at a magazine containing the subliminal messages, a man walks up. When Frank looks at him he sees a strange humanoid with bulging eyes and mottled skin. When Nada removes the glasses, the man looks like a white, male human.
Nada soon discovers that many people are actually aliens. Most of the aliens are wearing expensive clothing resembling wealthy-looking businessmen and women. When Nada enters a local grocery store and insults one of the aliens, the elderly lady speaks through her wristwatch, muttering about his location and the face that he "can see." Nada runs out of the store and into an alley where two alien policemen suddenly arrive. The two alien policemen ask where Nada got the sunglasses and he refuses to answer them. Aware that they intend to kill him, Nada escapes, killing both alien policemen. He steals a police shotgun. While evading the police, he accidentally stumbles into a local bank filled with aliens. Realizing that the jig is up, he proclaims, "I have come here to chew bubblegum and kick ass... and I'm all out of bubblegum." A shooting spree ensues as Nada opens fire, killing all the aliens that he sees. After killing many of them, one of the aliens sees him and disappears after twisting a dial on his wristwatch. Fleeing the bank and into a nearby parking garage, he forces a woman (Meg Foster) at gunpoint to take him to her house in the Hollywood Hills.
At the woman's house, Nada takes off the glasses to rest. He remarks: "wearin' these glasses makes you high, but, oh, you come down hard." Nada tries to convince the woman, whose name is Holly Thompson, about what is happening, but she remains skeptic. When Nada lets his guard down after Holly tells him that she's an executive at a local TV station, she tricks him into turning on the TV set where she pushes him through her window, nearly killing him. He leaves behind his pair of sunglasses, however, for her. Without putting them on, Holly calls the police.
The next morning, Nada returns to the construction site to talk over with Frank what he discovered. Seeing Nada as a wanted man for the shooting spree, Frank is initially uninterested in his story. Now a fugitive with no one to turn to, Nada returns to the alley where he disposed of the rest of the sunglasses. Nada recovers the box by breaking into a garbage truck that carries it away. Just then, Frank shows up with money to give to Nada to make him leave town. Seeing that Frank is human, Nada tries to persuade him to put on a pair of the sunglasses, but Frank refuses. Then, the two of them engage in a long and violent hand-to-hand fight as Nada attempts to convince and then force Frank to put on the sunglasses. When Frank finally puts on the glasses, he sees the aliens around him as well. Nada states: "Partner, life's a bitch... and this one's in heat!"
Frank joins Nada as they check into a local fleabag hotel and get in contact with the group from the church. They learn that a meeting is being held at a local community center later that evening. The community group listens to a seminar in the background introducing radical ideas. For example, the aliens are blamed for increased carbon dioxide and methane emissions "They are turning our atmosphere into their atmosphere" and quickly using up the planet's resources. Holly returns, claiming to now believe Nada, and delivers some information to the rebels about a possible location to where the aliens are broadcasting the subliminal messages.
At the meeting, they learn that the aliens' primary method of control is a signal being sent out on television, which is why the general public cannot see the aliens for what they are. An unknown but brilliant inventor has created a lens called the Hofmann lens. The lens shows the world as it really is. The sunglasses, which are also available as contact lenses, interfere with the aliens' hypnotic signal.
Nada then has a talk with Holly who tells him that after their encounter when he left behind his sunglasses, she put them on and hid them which is how she now believes him. Suddenly, Nada and Holly's conversation and the meeting place is raided by the police, who shoot to kill. Some of the resistance members flee outside while the police (a combination of both human and aliens) are gunning people down indiscriminately.
Nada and Frank escape into an alley behind the building and get away with the help of one of the wristwatch devices that teleports them to a mysterious underground facility. They find themselves in a network of underground passages under the city that link hidden parts of the alien society including a port for space travel. Through the passages they find the aliens are throwing a party for their human collaborators. Nada and Frank meet one of the homeless drifters (George 'Buck' Flower) whom they previously met in the workers shantytown, whom is one of the many human collaborators with the aliens. Thinking that they have been recruited as he has, the Drifter shows them around the underground facility which leads them to the studio offices of a local TV station.
The Drifter leads Nada and Frank to the basement of a local TV station, Cable 54, and the source of the aliens' signal. Nada and Frank pull out their weapons and kill all the alien guards, intending to shut down the hidden signal the aliens are using. But the Drifter gets away by teleporting himself and sounds the alarm. Arming themselves with assault rifles off the dead guards, Nada and Frank decide to get to the roof of the building to shut down the signal to make the world aware of the aliens among them. But aware that they will not survive, even if they succeed in shutting down the signal, Nada and Frank know that this is a suicide mission.
Nada and Frank engage in a gun battle with the guards in the studio hallways and offices they are at. Holly, who works at the station, is found by Frank and Nada and she leads them up to the roof of the building where the dish is broadcasting. Making it to a stairway, Nada runs up to the roof expecting that Holly and Frank are behind him. Suddenly, Holly pulls out a gun, presses it against Frank's temple, and kills Frank. Through the special contact lenses that he is wearing, Nada notices the broadcasting antenna. Holly gets to the roof, then takes aim at Nada. Nada finally realizes that Holly is yet another human collaborator with the aliens (and possibly the one who led the police to the rebels hiding spot). Then, a police helicopter appears where the aliens aboard order Nada to step away from the broadcasting antenna.
Aware that he is a dead man no matter what, Nada uses a hidden sleeve pistol and kills Holly. Nada then turns his attention back to the broadcasting antenna. Nada is shot and fatally wounded by alien police marksmen in the hovering helicopter, but manages to get one final shot from his small pistol and destroys the broadcasting antenna in the process. As a last dying defiant act, Nada gives the aliens in the hovering helicopter "the finger" as he lies dying on the roof of the building next to Holly's dead body, and the ruins of the broadcasting dish.
With the signal now destroyed, people around L.A. and the rest of the country are surprised to discover aliens in their midst... seeing them on TV, chatting with them at the bar, meeting with them at the office... and even having sex with them.